Smartgroup: Earnings Recovery Likely but Upside All Priced in

We lift our fair value estimate for shares in no-moat Smartgroup to AUD 7.90 per share, from AUD 7.50, largely reflecting the time value of money. Shares screen as overvalued at current prices. Our forecasts assume revenue and underlying EPS growing at around 5% and 6% per year, respectively, over the five years to 2027. We expect earnings growth will be driven by a rebound in vehicle supply, which supports increased novated leasing and fleet management volumes. Margins should improve as volumes recover, the level of product takeup grows, and more client engagement via digital portals—rather than support staff. Regardless, these positive factors appear to be fully priced into the stock.